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The gain or loss from a foreclosure or repossession will be the amount of outstanding debt immediately before the transfer, less the adjusted basis of the property. The adjusted basis is the total cost of the property less accumulated depreciation. If you have a gain, some of the gain may be taxed as "unrecaptured 1250 gain" at 25%.
I cannot tell from the information you provided whether you will have gain or loss.
Thank you for your question. Let me know if you need additional help.
You wanted to know whether I had a loss a loss or gain) I believe with this info you can help me better:
Current Market value $200,000.00
Purchase price it cost me $250,000.00
Capital loss (50,000.00)
Depreciation taken on the rental house to date: $ 48,000.00. This I believe is a long term gain to be recaptured, and it is taxable. But when you report this gain, you also must report the loss in value. My question is : Can you offset the capital gain of $48,000 from the LT loss of $50,000.00 in the tax return for 2010?
ABOUT DEBT FORGIVENESS in CH.7. Our debt on the house was discharged in Chapt 7. This would be loan balance of $328,000.00 less $200,000.00, Market value equals $128,000.00 of debt. This I know because my bankruptcy lawyer told me the debt is discharged forever. And I received my Chapt 7 discahrge to prove it.
It is the capital losses and gains aspects I am concerned when the house to be gets foreclosed on this month. Yes bankruptcy book says that if you can't pay you will be foreclosed on, regardless that the debt was previously discharged. I will pay you only if you answer the questions about the gains and loss qustions.
The gain on the foreclosure is the loan balance less your adjusted basis. This is $328,000 less your cost of 250,000 less the depreciation. This is a gain of $126,000.
As I am not experienced in bankruptcy as it relates to taxes, I will opt-out of this question and let another expert give you advice.
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